Income Tax Appellate Tribunal - Jaipur
Superintending Engineer vs Income Tax Officer. on 31 March, 1995
Equivalent citations: (1996)54TTJ(JP)608
ORDER
M. A. A. KHAN, J. M. :
In both these appeals, the appellant is a person responsible for paying incomes chargeable to tax under the head Salaries to the employees working under him and as such was the prescribed authority under s. 206 of the IT Act, 1961 (the Act) responsible for deducting tax at source under Chapter XVII and prepare, deliver or cause to be delivered to the prescribed IT authority within the prescribed time after the end of each financial year, a return of the tax deducted in the prescribed Form No. 24. Though the appellant duly deducted tax at source before making payment of salaries to his employees and also deposited the same with the State Exchequer in time, yet he failed to file the returns of such deductions made in 1987-88 and 1988-89 within the prescribed time. He filed the same on 10th April, 1989 and 15th Jan., 1990 for 1987-88 and 1988-89 respectively. On being asked by the ITO (TDS) to explain the cause for the delay in filing the returns the appellant pleaded ignorance of the provisions of the Act. The Dy. CIT did not feel satisfied with the explanation offered and levied penalty under s. 272A(2)(c) of Rs. 3,450 for delay of 345 days in 1987-88 @ Rs. 10 per day and of Rs. 22,800 for delay of 228 days of 1988-89 (@ Rs. 100 per day.
2. In appeals before the learned CIT(A), the appellant, besides challenging the levy of penalties on merits, appears to have urged that r. 37 of the IT Rules, 1962 (the Rules) which obliged the appellant to file return in Form No. 24 was held ultra vires by Bombay Bench of the Tribunal in the case of Ginners & Pressers Ltd. vs. Dy. CIT (1993) 47 TTJ (Bom) 393. The learned CIT(A) found no substance in appellants challenge either to the merits of the penalties or to the validity of r. 37 of the Rules and confirmed the penalties. Hence these appeals.
3. Before us the learned counsel submitted that since all the tax for the two years under consideration was duly deducted at source and paid to the State exchequer in time, penalties levied were not attracted. In the alternative he pleaded ignorance of the relevant provisions of the Act and thus submitting that it was an innocent default on the part of the appellant of not filing the returns in Form No. 24 in time for the two years The learned Departmental Representative, however, submitted that the default were clearly established and that ignorance of law was no excuse to the default committed.
4. After having heard the rival submissions we are satisfied that no penalty was exigible in the case of the appellant for either of the two years.
5. There is no dispute over the point that by not filing the returns in Form No. 24 by 30th April, 1988 and 30th April, 1989 the appellant had committed defaults punishable under s. 272A(2)(c) of the Act. The penalty contemplated in that provision of the Act thus stood attracted.
6. Ignorance of law is certainly no excuse for a default committed but, at the same time, there is no presumption in law that every body knows the law. The application of this rule would differ from case to case and person to person. In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch with law enforcing machinery and not required to discharge any statutory obligations under a particular law. Ignorance of law may be a good excuse in his case. But in another case there may be an educated person living in civilised atmosphere, coming in touch with the law-enforcing machinery, entrusted to discharge certain official duties and in relation to the discharge of such duties also having certain statutory obligations to discharge, discharging a part of such statutory obligations but failing to discharge the other related obligations. Ignorance of law may not be a good excuse in his case. Each case shall, therefore, have to be decided on its own merits.
7. In the instant case the person concerned is the head of a Govt. office and in his that capacity, is the person responsible for paying income chargeable to tax under the head Salaries to the employees, working under him. By virtue of his that position, he was under a statutory obligation under s. 192 to deduct tax before disbursing salaries to his employees. Being aware of such obligation he discharged that obligation by deducting tax at source. Another part, relating to his such statutory obligation, was to file a return of such deduction in the prescribed form and within the prescribed time before the prescribed authority. The earlier part of his statutory obligation under s. 192 must give him knowledge of the later and consequential part of that obligation as required by s. 206 of the Act. The statutory obligation to deduct tax at source was followed by and extended to the statutory obligation to file a return in time of such deduction. Admittedly the appellant failed to discharge that part of his statutory obligation. Being well aware of his obligation under s. 192 he cannot plead ignorance of the later part of the obligation under s. 206 of the Act. That being so, ignorance of law is no excuse in his case and we reject the argument of the learned counsel in that behalf. However, we find sufficient merits in the other limb of the argument of Mr. Chaudhary.
8. Sec. 272A(2), as is relevant for our purpose, reads as under :
"s. 272A(2) : If a person fails -.............
(c) to furnish in due time any of the returns, statements or particulars mentioned in s. 133 or s. 206.................................
he shall pay by way of penalty, a sum which shall not be less than one hundred rupees, but which may extend to two hundred rupees, for every day during which the failure continues :
Provided that the amount of penalty for failure in relation to returns under s. 206 and 206C shall not exceed the amount of tax deductible or collectible, as the case may be."
A plain reading of the above provision makes it clear that s. 272A(2) provides the machinery for working out the amount of penalty which may be imposed, inter alia, for default of furnishing the return under s. 206 beyond the prescribed time. The penalty is to be calculated with reference to the days of default and computed at the prescribed rates. In the application of the prescribed rates, the authority levying the penalty has been given some discretion. The proviso to s. 272A(2), however, restricts or controls and in fact carves out a sort of exception to the very power of the authority concerned to levy the penalty. The proviso says that the amount of penalty for failures in relation to s. 206 and 206C shall not exceed the amount of tax "deductible" or "collectible", as the case may be.
9. The words "deductible" and "collectible" used in the language of the proviso to s. 272A(2) refer to the part of the amount of tax, which remains to be deducted or collected, in whole or in part. The amount of tax which has been deducted or collected would be called "tax deducted" or "tax collected". The part of the amount of tax which remains to be deducted or collected would fall within the purview of the expression "tax deductible" or "tax collectible", as the case may be. The words "deductible" and "collectible" therefore differ in meaning and convey sense different from those of the words "deducted" and "collected". The former expressions refer to an incomplete act or an act yet to be done, the later to a completed act or act already done. The amount of tax already "deducted" or "collected" should normally not attract levy of penalty. But the amount of tax which remains to be deducted or collected may also attract penalty. In its wisdom, the legislature has thought it proper to use the terms "deductible" and "collectible" and not the terms "deducted" and "collected" in the language of the proviso to s. 272A(2) of the Act. The penalty intended to be levied for failure to file the return under s. 206 or 206C within the specified time is certainly to have a relation to the duration of the period of default but at the same time such penalty, irrespective of the duration of the period of default is not to exceed the amount of tax deductible or collectible as the case may be. It means that the mandate contained in the proviso to s. 272A(2) has an over-riding effect over the main provisions contained in s. 272A(2). It, therefore, follows that in a case wherein there is no amount of tax "deductible" or "collectible" as the case may be, no penalty under s. 272A(2)(c) can be levied, the period of default notwithstanding. In the instant case since, admittedly, there was no amount of tax deductible or collectible, there can be no levy of penalty under s. 272A(2)(c) of the Act.
10. The learned Departmental Representative pointed out that the proviso to s. 272A(2) was inserted by the Finance (No. 2) Act, 1991 w.e.f. 1st Oct., 1991 and, therefore, he submitted, the benefit of the said proviso cannot be given to the appellant in the present case. Mr. Chaudhary, on the other hand, submitted that the benefit of a legislation which obviates hardships to the tax payer, should extend to an assessee whose case is pending for final adjudication at the time of the enforcement of the beneficial legislation.
11. Generally, the law applicable at the time of commission of an offence or default would be applicable to decide the case involving that offence or default. Therefore, the quantum of penalty must be determined by reference to the law as it stood when the offence or default was committed. But, although an amendment may come into force after the date of default, it should apply to those cases of defaults also in which proceedings are still pending on the date of coming of the amendment into force provided the amendment is purely procedural and affected the machinery for levying and collecting penalty only and not the very ingredients of the default. The provisions of taxing statute, particularly those which cast a penal liability on the subject, are required to be so construed as to obviate the hardship of the subject without causing damage to the object sought to be achieved by such provisions. The provisions of s. 272A(2), as they stood at the time of default committed in the present case, required the levy of penalty with reference to the period of default only without having any reference to the gravity or extent of such default. An assessee might have defaulted in not deducting the tax at source of the amount of, say one rupee or a few rupees only. His default might have continued for, say, one month. He was to be visited with a penalty of Rs. 3,000 minimum or Rs. 6,000 maximum. In another case the assessee might have committed such default of the amount of say, Rs. 10 lakhs and the default might have also continued for the period of say, the same one moth. In his case too the penalty leviable under s. 272A(2)(c) would be same Rs. 3,000 minimum or Rs. 6,000 maximum. The provision of s. 272A(2) prior to insertion of the proviso were thus not only somewhat discriminatory but also caused hardship to the taxpayer and an anomalous situation. The legislature must not have intended that. It was, perhaps, with a view to remove such type of discrimination between the members of the same class, anomalous situations, and hardships that the legislature, in its wisdom, thought it proper to come out with an amendment which seeks to have some relation with the amount of tax "deductible" or "collectible" in the matter of quantum of penalty and tends to remove the anomalous hardships of the taxpayers. The amendment in question thus besides being beneficial to the subject, clarifies and explains the intention of the legislature, as it always was there, in enacting the provisions of s. 272A(2) and aims at removing the possible anomalous situations, which the same class of tax payers were likely to face. The charging provisions in the present case, are contained in s. 206 and the provisions contained in s. 272A(2) are purely procedural providing for the machinery for levying and collecting penalty. The amendment did not affect the very ingredient of the default contemplated by s. 206 or s. 206C. The proviso to s. 272A(2) though inserted w.e.f. 1st Oct., 1991 are, therefore, applicable to those cases of penalties also in which the proceedings are pending on that date. Appeal is simply continuation of the original proceedings. We, therefore, hold that the proviso to s. 272A(2) is applicable to the instant case. That being so, benefit of the proviso to s. 272A(2) is available to the appellant.
12. In view of the above discussion, we hold that the penalty under s. 272A(2)(c) was not leviable in the case of the appellant for either of the two years. The penalties levied are, therefore, cancelled and both the appeals are allowed.